Energy is "where all the leadership is coming from," says Charles Blood, strategist at Brown Bros. Harriman. "And it's all about the earnings."

While high oil prices present a potential drag on the economy, they've been a relatively positive force on the stock market this year by:

•Fortifying earnings. The energy group is expected to generate 12% of the total first-quarter earnings from companies in the Standard & Poor's 500, S&P says. They account for only 8.5% of the S&P's market value, so they're pulling more than their share in terms of earnings contribution.

S&P 500 companies are expected to post 11% earnings growth in the first quarter, according to S&P. However, if the energy sector is removed, the expected growth rate falls to just 8%.

•Diminishing damage. If earnings growth is too fuzzy, consider this: Seven of the 10 best-performing S&P 500 stocks this year are energy related. Valero Energy, which Monday announced it is buying Premcor for $6.9 billion, is No. 1 with a 67% 2005 gain.

If you took energy stocks out of the S&P 500, it would be down 11.2% this year, twice the actual 4.9% loss as of last Friday, the most recent data available.

Problem is, it's not necessarily good that the market's performance is so reliant on just one sector, says Sam Stovall, a strategist at S&P. "Who wants to be balanced on just one peg?" he asks.

Stovall says energy stocks can continue to perform well this year, as strong worldwide economic growth keeps demand high. But he adds that energy is typically a late bloomer in stock market cycles, and a contraction usually follows after the stocks peak.

The sector has already been showing signs of strain. Stocks in the defensive utilities and pharmaceuticals industries are quickly catching up to energy, which has cooled. Energy stocks have gained 1% in the past month, while utilities are up 3.6% and drugs 3.3%.

Brian Belski, strategist at Piper Jaffray, says energy earnings are about to slow. Energy companies are expected to post 0.1% lower earnings in the fourth quarter, which is well below the 33% growth in the first quarter. "If you look at earnings, (the) energy (sector) is vulnerable," Belski says.